On one side is the emotional argument that a gift is the only way to truly show appreciation for another person. Gift-givers argue that cash is impersonal, that it is akin to a transaction you would make with someone you don’t care about.
On the other side is the rational argument that cash is the only way to ensure your gift doesn’t end up being exchanged or thrown away. In Scroogenomics, published in 2009, economist Joe Waldfogel estimates around $12 billion in gifts are misallocated in the U.S. each year in “an orgy of wealth destruction”.
Fortunately, there is a middle ground that strikes a balance between emotion and reason: a gift that has cash value but isn’t presented in cash or check. We present to you: the top 5 most thoughtful ways to give money to loved ones for the holidays.
1. Make a Deposit into an Online Savings Account
What type of gift would be more well received than one that appreciates in value over time, e.g. a deposit into an online savings account or certificate of deposit (CD)? True, annual percentage yields (APYs) are yet to return to the levels seen prior to the 2007-8 financial crisis – when yields of 4-6% were commonplace – but there are still good deals to be found if you know where to look.
These days, the best online banks offer up to 2% APY on high-yield savings accounts and 2.30% on long-term CDs where the money is locked in for 3-5 years. Thanks to compound interest (interest on interest), a savings account or CD becomes a gift that keeps on giving. What’s more, you can add value by making the deposit every year for the holidays.
Note that consumer finance laws prevent you from opening a savings account in someone else’s name. If your recipient has a savings account, then all you need in order to deposit money into that account is their full name and account number. If they don’t yet have an account, you may want to assist them in setting one up.
2. Pay Down Part of Their Student Debt
Statistically, chances are one or more of your loved ones has at least some student loan debt. That’s because 45 million Americans–almost 1 in every 5 American adults–owe a combined $1.5 trillion in student debt, according to the latest estimates from the Federal Reserve Bank of New York and Experian.
Obviously, the quickest way for a person to get rid of their student debt is to pay it off–but that’s sometimes easier said than done. According to a New York Fed report in Q2 2019, 9.9% of student loan balances are seriously delinquent, meaning the borrower is at least 90 days overdue on payments.
A small cash injection may be just what your loved one needs to help them pay off their student debt (or at least avoid late payment fees). What’s more, by paying down part of your loved one’s principal, interest also gets deducted–meaning the savings exceed the amount you put in.
3. Give a Gift Card
Okay, we admit this one is a little old-fashioned, but it’s still highly relevant in 2019. A gift card is the classic compromise between cash and a physical gift. It has a clear monetary value, but you don’t decide what to buy–and therefore there is less risk of the gift just going to waste.
Before purchasing a gift card for someone, you should obviously think carefully about finding a store your recipient likes. It’s also worth reading the fine print for the expiration date and restrictions, so as to avoid any unwanted surprises that might spoil the gift. Lastly, to prevent unauthorized use, make sure nobody activates the card until it reaches the recipient.
4. Make a P2P Transfer to a Mobile Wallet
Transferring money to someone’s mobile wallet is the equivalent of giving cash or a gift card, re-fitted for 2019. The big 3 mobile payment apps are Apple Pay, Google Pay (formerly Android Pay), and Samsung Pay. These apps allow the user to pay for things online and in physical stores without having to use an actual credit card. With Apple Pay and Google Pay, you can make a peer-to-peer transfer to any other user, provided you have their phone number or other relevant info (such as Apple ID or Gmail address). Samsung Pay is a little tricker.
All 3 of the major mobile payment systems have massive global reach. Click the following links to find out about the millions of places in the US and worldwide where Apple Pay, Google Pay, and Samsung Pay are accepted.
5. Use a Money Transfer Service
Cash might seem impersonal if you give it in person, but it suddenly takes on a whole new dimension when you send it to someone living abroad. Like plane tickets and TVs, money transfers have become cheaper in recent years–in fact, a lot cheaper. That’s thanks to the rise of money transfer services that have come in and undercut the banks on rates and fees.
With the top money transfer services, your money won’t lose more than 1-2% of its value before reaching your recipient. That’s a far better deal than you’ll get at the banks, which can charge up to 8x more than the best money transfer services.
What’s more, money transfer services are quicker than the banks, and they give you more options. Bank-to-bank is the standard method of transfer, but some services allow you to send the money to a person’s debit card, mobile device, or even in cash. Depending on the method, the money should reach your recipient within 0-4 business days – which is great if you decide to send a spontaneous holiday cash gift to a loved one overseas.
Giving Gifts Doesn’t Have to be Stressful
As we’ve shown here, there are more than 2 ways to give gifts to loved ones for the holidays. If you’re still stuck deciding what to get for your friends and relatives, we recommend checking out Top10.com for further inspiration.